Question

What is an example of lack of economies of scale in the divisional structure?

a) Divisional structures always result in economies of scale.
b) In certain cases, the divisional structure may lead to duplication of resources and reduced economies of scale.
c) Economies of scale are irrelevant to divisional structures.
d) Divisional structures enhance economies of scale automatically.

Answer 1

A lack of economies of scale in divisional structures occurs when there is duplication of resources across divisions, leading to increased costs and reduced efficiency.

Step-by-step explanation:

An example of lack of economies of scale in the divisional structure is when the divisional structure leads to the duplication of resources, which can result in reduced economies of scale. This can happen because each division may require its own set of resources such as management teams, equipment, and facilities. Having multiple divisions with overlapping functions can increase the overall costs and decrease efficiency, which contrasts with economies of scale where increasing the scale of output reduces the average cost of production.

Answer: a) Divisional structures always result in economies of scale.